Where Ricardo and Mill Rebut and Confirm Arguments of Mainstream Economists Supporting Globalization1

In this paper, Samuelson by utilizing the Ricardian theory of comparative advantage has investigated the impact of economic growth of china on American economy which has been significant in recent decades. He has considered the various assumptions regarding the economic relation of China with America. The first assumption is that if the two countries commit to trade with each other, based on the law of comparative advantage, both the countries can benefit from the trade compared to autarchy condition. Thus trade with China is better than, not to trade with that country. In the second assumption, both china and America will trade with each other, but if china due to succeeding higher rate of productivity, attains a significant rate of growth, America as a trade partner of china can benefit from the transaction if and only if, the rate of growth of productivity in china will be merely in commodities which exports to America. The reason is that in consonance with the theory of Asymmetric Growth in International Trade, and under the above condition, the terms of trade for America will improve while for china will deteriorate, but if the productivity growth in china is mainly due to imports from America, in this condition, the terms of trade for America will distort and for china it improves. Thus to specify, whether rate of growth of china may be a threat to American economy will depend on the rate of growth of productivity of China in her exports and imports of commodities over the time.